Notes for trust officers, private bankers and others concerned with estate and trust planning, from a Merrill Anderson Senior Editor and his retired mentor.

Saturday, November 20, 2010

Sell Like a Fiduciary, Quack Like a Pony?

In Dear S.E.C., Please Make Brokers Accountable to Customers, Tara Siegel Bernard begs the regulator to transform broker-dealers and annuity salespeople into fiduciaries. But the problems she acknowledges raise doubts that the fiduciary standard can stretch that far. Maybe there's a simpler solution: Require brokers to call themselves brokers – not "financial advisers" – and stop misusing the term "wealth management."

… the question [is] whether ALL investment advice - even broker-rendered advice that is "solely incidental" to that broker's "conduct of his business as a broker or dealer and who receives no special compensation therefor" [Investment Advisors Act of 1940, Sect. 202(a)(11)(C)] - ought to be subject to the FIDUCIARY standard that generally applies to "investment advice". Sect. 913 of Dodd-Frank specifically states that the charging of commissions is not, per se, a violation of fiduciary duty. But the question remains as to whether the rendering of advice by someone compensated by commissions is subject to that fiduciary duty.